Equity outlook: Parallel worlds

Global equities can continue rising because earnings growth and economic investment outweigh mounting macroeconomic and geopolitical risks, although markets are likely to remain volatile and sector rotations can be abrupt.

• The constructive case rests on rapid technological and industrial transformation, strong liquidity and expected stimulus ahead of the US midterm elections; US manufacturing is running hot, emerging markets are contributing more global growth, and even Germany is showing signs of recovery.
• The rally is increasingly earnings-driven: S&P 500 earnings forecasts range from the mid-20% to high-30% growth rates for the year, with mid-teens growth expected in 2027, while STOXX earnings growth is expected in the high single digits.
• AI infrastructure spending remains the main earnings engine, but recovering industrial production and manufacturing and infrastructure demand are broadening growth beyond technology; the Magnificent Seven are less dominant than in previous years.
• The main threats are renewed inflation, higher-for-longer rates, heavy public debt, refinancing pressure, US-China trade disruption and wars in Europe and the Middle East, with further escalation potentially worsening energy prices and inflation.
• Emerging markets have outperformed developed markets since the start of 2025, with MSCI EM returning 162.82 versus 132.29 for MSCI World through 31 August 2026; EM earnings per share has grown at a 20% CAGR since April 2024, while 2026 forecasts imply a 43-percentage-point growth advantage over developed markets.
• The EM earnings recovery is broadening beyond TSMC, Samsung Electronics and SK Hynix: Korean EPS estimates have risen 40% versus 10% for EM overall, and strength is spreading into energy, healthcare, industrials, consumer staples and financials.

Takeaway: Robeco remains constructive on global equities but recommends careful positioning beyond the AI and momentum trade, since the outlook depends on continued earnings delivery, no major hyperscaler capex shock or escalation in the Iran war, and manageable rate and valuation risks.